Q2 2020 Hasbro Inc Earnings Call

July 27, 2020

[music].

Good morning, welcome to the Hasbro second quarter 2020 earnings Conference call.

At this time, all parties will be in listen only mode.

A question answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Today's conference is being recorded if youve any objections you may disconnect at this time.

At this time wed like to turn the call over to Miss Debbie Hancock Senior Vice President Investor Relations. Please go ahead.

Thank you and good morning, everyone.

Joining me. This morning are Brian Goldner, Hasbro's, Chairman and Chief Executive Officer, adept Thomas Hasbro's, Chief Financial Officer today, we will begin with Brian and dad, providing commentary on the company's performance and an update on the company's response to the covert 19 pandemic then we will take your questions our earnings release and presentations.

Slides for today's call are posted on our Investor Web site. The press release and presentation include information regarding non-GAAP adjustments and non-GAAP financial measures our call today, well discuss certain adjusted measures, which exclude these non-GAAP adjustments a reconciliation of GAAP to non-GAAP measures is included in the press release.

Ladies and presentation. Please note that whenever we just got earnings per share or S. We're referring to earnings per diluted share before we begin I would like to remind you that during this call into question and answer session that follows members of Hasbro management may make forward looking statements concerning management's expectations goals object.

Yes, and similar matters. These statements include among others the impact of the Croda virus on our business financial results and liquidity our efforts to protect the health and wellbeing of our workforce customers consumers manufacturers and suppliers our efforts to ensure we have adequate liquidity at our initiatives to support our community.

Including our global workforce children and their families. During these difficult times. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward looking statements. These factors include those set forth in our annual report on form 10-K, most recent 10-Q.

In today's press release and in our other public disclosures, we undertake no obligation to update any forward looking statements made today to reflect events or circumstances occurring after the date of this call I would now like to introduce Brian Goldner, Brian.

Thank you Debbie good morning, everyone and thank you for joining us today.

Our global teams continue to execute well working a distance and across businesses that are rapidly evolving.

They are leveraging our experience data insights and capabilities to address the ways in which this global pandemic has challenged us.

And we are making significant progress in this third quarter, while we're headed toward a good holiday season.

Our belief and the opportunity for Hasbro over the next few years has also intensified as we see this team in action during this challenging year.

While there is a great deal of unpredictability, you're so far it's unfolding in line with the expectations, we shared with you last quarter.

The second quarter is expected to be our most difficult as we experienced closures in many of our third party factories at retail and entertainment production, which negatively impacted revenues.

We believe the third quarter will improve from the second quarter, and we expect to make progress, but there are evolving situations that exist around the world.

Finally, we're executing strong marketing campaigns and launching innovative new products to support what we believe can be a successful holiday season.

As a grounding principle, we remain focused on the four key areas, we shared with you in April.

Demand supply liquidity and community.

Looking at the man consumers continue to seek out Hasbro brands and our content at high levels.

Global point of sale increased in the high single digits and has continued to be strong as we entered the third quarter across an even broader array of our brands.

Engagement in our content is in several cases at record levels.

In recent months the number of retail stores opened has increased dramatically.

We began the second quarter with approximately 30% or more of stores, where we are doing business close globally.

Traffic was down in certain European countries by as much as 50% at the peak.

Today, we are below 10% of retail close globally with the greatest impact in Latin America, where approximately 25% of stores remain close.

These percentages are changing based on the ability to reopen economies and keep them open.

We expect Latin America will be a difficult region for us in 2020, given the impact of cobot 19, and the small percentage of business executed online.

Mobily E Com grew rapidly as it represents where the consumer has the broadest access to the Hasbro brands they want.

Nearly 30% of our toy and game revenue in the quarter E com share of revenue expanded by nearly 13 percentage points.

Our teams were ready to capitalize on this shift as we've been investing and building a digital first organization for many years.

During this time, we further our capabilities and exhibited great creativity and flexibility that meet the consumer where they want to shop.

In addition to strong results from pure play an omni channel E Com Hasbro Pauls, our DTC channel had a record quarter implemented successful campaigns, including fan first Friday, which brings fan something new and exciting each and every week about the brands They love.

Earlier this quarter, we launch what is now our most successful has web project ever.

X men legends Marvel Central.

It hit our funding threshold and 24 hours and after 10 days has more than 11000 backers for 350 dollar collectible items.

While pulse is still a relatively small revenue number this connection with our fans as powerful and will grow overtime.

Demand remains strong for our games in Plato, but the production shutdowns, we discussed last quarter, which began mid March and last until about mid may impacted our ability.

Fully meet demand during the quarter.

In stock levels for games and played out were below our normal thresholds and we expect to be caught up later this quarter and ready for the holiday.

Production disruption also impacted certain product time.

Delivery in the second half of the year.

Nerve saw growth in second quarter Global Pos as we quickly pivoted our strategy to capitalize on consumers looking for fun ways to get the family outside and active.

In the U.S. in Europe, Pos for the past several weeks increased double digits, but some of our second half launches have shifted about a month later due to the limited supply coming out of India.

In addition, as retailers moved to a digital model and stores were closed their retail inventory requirements decline.

In the U.S. retail inventories reduced in the high teens, which represented about seven weeks of inventory.

Similar ships occurred in other markets.

We believe the digital led model will continue with E com today forecasted to be about 30% or more of our full year revenues.

We also believe some retailers may exhibit caution is they gauge the rate at which markets reopened and shoppers returned to stores.

The industry continues to undergo a shift.

Filling consumer demand versus filling stores, and we're very well position.

Throughout this year, our retailers and our consumers have supported the toy and game category and our joint plans with retail partners give us confidence in our ability to deliver a good holiday season.

We have all new initiatives anymore than I can cover here, including new products for brands with good momentum in gaming and ER as well as Disney's frozen too and Lucasfilm Star Wars, where the property should seen great consumer demand and have strong new lines, including the retail a rival of products featuring the.

Trial from the Disney plus series, the man Delorean and a much anticipated animatronic condition arrives for the holidays.

Patrick the gathering revenues were down in the quarter as forecasted the brand is performing well overall and set up for a good second half of the year in both analog and digital play behind new card releases and the expansion of magic the gathering arena to mobile and into China.

Moving to supply our supply chain is now in good position.

We have returned to production in our third party factories.

China factories were caught up in early second quarter, and we anticipate catching up on demand in other locations by the latter half of this quarter.

Our global operations team has worked diligently to maximize our global footprint shifting production to other locations, where feasible and have re forecasted the year based on the changes the index and timing.

Next liquidity.

Hasbro's into strong financial position and we ended the quarter with just over $1 billion in cash on our balance sheet.

Our revolving credit line up $1.5 billion remains available and accessible.

As the shut downs have continued we have taking cost out of the business in areas, where we cannot currently operate including making difficult decisions. The furlough some employees and to simplify our commercial organization.

On the content side you one production is gradually returning.

As a result of being unable to produce to our plan our cash spend on content for Twentytwenty is now projected to be approximately 450 million to $550 million.

We will complete and deliver this content this year, but our slate and some revenues will also shift into 2021.

Demand for you on content is strong and the team is doing good work executing a successful virtual crime and developing over 100 film and 16 is TV projects, including Hasbro IP and new IP.

We launched a new animated series on Netflix alien TV and continued to develop and produce new content for Pep a pig TJ mask and the my Little Pony 2021 feature film.

We've made great progress integrating our businesses, including combining our consumer products and entertainment teams and remain on track to deliver the hundred $30 million in synergies by year end 2022.

Importantly, we are working to unlock the long term value of the organization as we develop new entertainment and commercial opportunities around Hasbro IP.

Finally community.

Our focus on our purpose and make the world that better place for all children. All families has never been more important.

Hasbro has continued to support global philanthropic initiatives that bring believes to children and their families worldwide. During this crisis by providing meals as well as learning materials to those most in need.

We remain deeply committed to using our brands our resources and our expertise to help make a difference and our local communities.

The world.

We've applied this belief to the ongoing dialogue across our company around racial injustice listening in looking within ourselves and our organization critically and honestly.

Well, we don't have all the answers we have never been more committed to fostering a culture of inclusion and using our brands, our entertainment and our influence and make a difference in the world.

At Hasbro, we're in the unique position to help shape mines and hearts from the earliest stage.

We had the privilege of being part of childhood fandom intergenerational play in entertainment globally.

With that privilege comes a responsibility to foster inclusion and to help teach the next generation that everyone is equal and everyone is worthy.

Making a difference in the world its purpose and our legacy.

We want every kid to feel like the hero see themselves on the screen in their toys and games I feel they belong and that they matter irrespective of the color of their skin.

I believe we have strengthened Hasbro this year by rethinking how weve done things in the past and we've changed our approach going forward.

We've remained invested in areas of high consumer consumption is for interest.

Innovation content digital gaming and consumer products.

We strengthened our path to the consumer leveraging our digital first multichannel strategy and our global retail footprint.

We increased our agility and speed to market adapting Hasbro plans as initiatives shifted to next year and we are set to execute and deliver a strong 2021 across a robust lineup of entertainment and innovation.

For the entertainment from you want and our partners.

New gaming launches in digital and tabletop and new play initiatives across our brands.

I'd now like to turn the call over to debt debt.

Thank you, Brian and good morning, everyone.

As Brian said, our global teams have come together in 2020, and we're operating from a position of strength.

As we forecasted in shared last quarter. The second quarter was extremely challenging, but we have reassured by the strong demand for our products and our content by your ability to reduce expenses and manage our cash and by our teams creativity and agility during these times.

We shared with you last quarter is it up to 25% of retail could be close during the second quarter lines action Entertainment production would not return until the third quarter.

Magic the gathering would have a difficult quarter due to tough comparisons based on a release cadence a year ago and revenue timing and that profitability will be challenging.

We saw those realities come to fruition.

Going forward and stores reopen entertainment production begins to return magic is meaningful launches in analog and digital and we execute our marketing plans for the back half of the year. We believe the third quarter is the beginning of the road to recovery and performance should meaningfully improved from the second.

Corridor.

We expect to be position for a good holiday season.

The ability for economies to continue reopening stores in production.

Product in entertainment and keep them open will be important factors in the years ultimate outcome.

My discussion today will be versus pro forma adjusted 2019 earnings and exclude E. One acquisition related expenses severance any amortization.

In our reported numbers, we reflected 26 and a half million after tax of onetime acquisition expenses and amortization or an impact as 19 cents per share.

And 10.1 million aftertax or seven cents per share of severance expense associated with simplifying or go to market approach and our film and TV businesses were operations have not returned.

Our integration with E. One remains on track and we continue to target synergies of 130 million by year end 2022.

This includes 2020 cost savings of approximately $20 million before one time expenses recognizing the E. One business like the overall Hasbro business is not opry into our original plan due to covert 19.

These synergies or plan to increase in 2021, as we begin to Insource toys and games for everyone properties and recognize more of the benefit of cost savings.

We continue to focus our organization around demand supply liquidity and community I will begin with liquidity.

We have substantial liquidity ending the quarter with over a billion dollars in cash in the balance sheet, and one and a half billion available to resolve in credit facility.

We are well within our financial covenants.

Our peak working capital period remains ahead coming in the October November timeframe.

Since last quarter, we've reduced our expenses and we're closely managing your cash including our customer collections.

Throughout the second quarter in certain markets in channels. So customers remain close in the collection is certain receivables is delayed.

We are seeing improvement in stores reopened and we're working closely with these customers to successfully navigate this period.

As a result dsos in the period increased to 96 days from 84 days on a pro forma basis last year.

Second quarter 2020 receivables include approximately $207 million associated with the one.

Our cash spend on content. This year has been reduced as production is limited due to covert 19.

For the full year, we plan to spend within a range of $450 million to $550 million, which is approximately 200 million below our initial expectations for the year.

This reflects the doing it's not an elimination and were making these investments to develop content and drive revenues as we schedule productions in 2020 and into 2021.

Our capital expenditures are expected to be approximately 145 255 million. This year inline with our first quarter update and we spent $64 million in the first half of the year.

Tooling for our products remains the largest item and it's time to the back half of the year.

This amount also reflects the capitalization of digital gaming development expenses related to games to be launched in future years.

Inventories essentially flat year over year, including a small contribution for me one.

On a constant dollar basis inventories were up approximately 5%.

Our next focus is demand.

Build on Brian's commentary.

For the second quarter revenues declined 28% absent FX.

In the U.S. in Canada segment, you as point of sales growth in the high teens did not translate to revenue growth due to temporary store closures product shortages and lower retail inventory.

Both pure play and Omnichannel E Com retail grew rapidly.

Hasbro gaming revenue increased more than 20% in certain partner brands, notably Star Wars and frozen to also grew.

Despite lower expenses operating profit declined on a lower revenues, including a negative mix impact from lower magic the gathering revenue.

International segment revenues declined just well revenues were down in each region Latin America declining the most meaningfully as the region started the year with higher retail inventory and has a very low penetration of E com.

Similar to the U.S. and Canada segment temporary store closures product shortages in lower retail inventory impacted shipments in the quarter.

So let gaming in partner brands were up in the segment and E Com revenues were up meaningfully.

The International segment reported an operating loss versus operating profit last year as a result of the lower revenues, partially offset by lower expenses.

In the entertainment licensing and digital segment revenues declined due to the closure of Backflip Studios in late 2019, and lower consumer product revenues.

In consumer products, we estimate as many as 60% of retailers were closed during the quarter.

Many of these retailers continue to be impacted and not all our licensees had access to E com and the supply chain that we do.

We expect this part of the business will also be impacted in Q3.

Profit improved in the quarter due to lower program production expense and lower expenses due impart to last year's closures Backflip studios and the additional lunch period advertising for magic the gathering arena.

In the one segment, while content demand by consumer consumers remain high revenue was hampered by the limits on live action production and delivery along with lower consumer product sales advertising revenues and live events.

Operating profit in the segment increased due to lower program amortization royalties and advertising expense this year versus last.

All right, let's look at supply.

As we outlined last quarter production shutdowns in our factories during the second quarter impacted our in stock levels, most notably in games and delays the delivery of certain second half 2020 lunches.

Well factories in China, which represent 55% of our production we're open.

Factories in the U.S., Ireland in India were closed for much of the corridor.

Production is back in operating and the teams are targeting the latter part of the third quarter to be caught back up.

This depends on me and able to mature production can continue and staffing is adequate levels.

Should we airfreight product to meet demand during the holiday period, this will increase cost.

As we close with community, we remain focused on our team safety health and wellbeing and we recognize what a tremendous job. Our teams continue to do during what is very challenging in uncertain period.

They are showing great result, and ingenuity to churn or path forward and provide support for each other and for the communities in which we're operating.

There are learnings from the six Syrians, which will help define our company and how we operate for years to come.

Before we open for questions, let me touch and a few expense items on a pro forma basis.

Gross margin increased 160 basis points, including both cost of sales and program production cost amortization, driven by product mix, including delivery of higher margin content and a reduction in program amortization somewhat offset by higher sales allowances.

The decrease in advertising was driven by lower promotional spend it easy one due to lack of theatrical releases combined with savings across all of our commercial businesses.

We've aligned our advertising to reflect the current demand environment, but also shifted the timing of spending and have meaningful promotional plans to drive consumer demand for the holiday.

SDMA was down $26 million, reflecting the cost savings initiatives, we've undertaken across the business as well as lower freight and warehousing.

Bad debt expense was up about $5 million within the commercial regions, reflecting the current environment.

As in the first quarter, the alignment of accounting policies on cost capitalization and stock compensation resulted in higher admin cost for anyone.

Within its DNA approximately 80% of our dollars are fixed resulting in a fluctuation as a percentage of revenue.

In closing.

Well, we continue to see the year developing as we anticipated there remains a great deal of uncertainty in the global marketplace that underlies this expectation.

What has been consistent is the robust demand for our brands and content and the strong execution by our global teams.

We are positioning ourselves to execute a good holiday season and to drive our business in 2021 and beyond.

Now, Brian and I are happy to take your questions.

Thank you at this time will be conducting a question and answer session.

If you like to ask a question. Please press star one on your telephone keypad and a confirmation tome indicate your line is in the question Q.

Let me press star to who like to move your question from the Q.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

So that we may address questions for his many participants as possible. We ask you limit yourself to one question and one follow up.

Thank you and our first question is from the line of RPD Purion with us.

Hi, Thank you very much you indicated in the release that you expect revenue from shipment to brick and mortar delivery of content to continue to be impacted by shutdowns and I know you also mentioned consumer license revenue I'm in your prepared remarks could you, perhaps clarify the center that impact I guess on the one side I understand there.

There will be tied to sort of partial resumption of production, but on the legacy Twain business. It sounds like the majority of retail footprint just open.

I mean, perhaps single digit in terms of as a percentage of total could you just clarify what that means and what well do position.

As for the back half.

Sure. Good morning first on you won you're right. We've begun to commence productions again, particularly focused on the Canadian market, where we're able to produce and in the UK and we're waiting to be able to start production here in United States, particularly in the Los Angeles area other U.S.

As we look at the.

Plan for the year, we just want to highlights the fact that Latin American retailers.

Well remain somewhat close to about 25%, which gets us to about that below 10% globally.

Latin America has had more of an impact from overnight gain and less E commerce business.

Commerce, there is about third of the size side of the business than the rest of our global business, we're executing quite well globally. So we wanted to highlight that as well.

And then just wanted to make it clear clearly a in Q2, we were starting to ship or wanting to ship more for our second half initiatives and clearly coming out of India.

Where we have a lot of Gardner production on some new items, we were not able to get that in for Q2, and so that will come in as part of Q3. We're also catching up in does U.S. and think about the Massachusetts factory, where.

Many of our games played or made as well as the Irish factory that was close up from about mid March two about mid may and so again this catch up period.

But overall, we feel very good about continued strong Pos that continues to expand across the border.

Products.

Strong plan from was it's the coast and magic the gathering and Doug Dragons for Q3, and then moving into a very good holiday season with lots of new initiatives.

Helpful. Thank you why don't you want it sounds like class.

In terms of pumping production for the years lowered further Copeland and you want it was down about.

We put that on putting your basis.

And you also mentioned some great revenue shift there to say that revenue on that side of thing <unk> was down more than 40% over here.

We what we're looking at is up.

The restarting of production and you want has a number it shows that had been sold around the world different platforms and so now it's just a matter of commencing production and some of the difference of whether the revenue we'll call. It 2020 or 2021, just has to do with how many episodes were able to deliver this calendar year, which is arpus.

Cool or whether those episodes get delivered and B 2021 period, and then of course, we recognize the revenues, but we delivered the episodes primarily step I don't if you want to comment further.

Yes, exactly Brian it's the cash spend is down because we are just seeing a little bit of a slower return in certain markets to be able to actually complete that production. So as we look at bad. It's it's really a delay in delivering the episodes me, particularly think about the live action. It's just the delay and the revenue may try.

I'm, sorry to 2021 as to when we're actually able to complete yet.

Well you there.

Our next questions from the line of Steph Wissink with Jefferies. Please proceed with your question.

Thanks. Good morning, everyone. We had two questions. One is a housekeeping question. Brian you mentioned lack Cam has a significant under indexing in E. Com Im wondering if you can just merchants around the world and talk about E com as a percentage of the total mix and the in a big region. Just so we can understand the scope of penetration.

And then my bigger picture question. It's just something you think about maybe what you have missed in opportunity in the first half of the year, how much should we think about your ability to recoup some of that in the back half in both E. One and on the 20 side in terms of demand. He Brian you mentioned seven weeks have supply in panel, that's pretty low so Q.

It's about how much you think you can recover and build back into town level inventory over the course of the next.

12 to 15 weeks. Thank you got yeah. So we I thinks that we built a great econ capability globally. So if you go around the world by region. The U.S. business is tracking right now about a third of our business is coming from the comment omni channel.

In Europe, it's about 30% and in Asia, It's about 30% as well in Latin America.

We've grown it substantially in a in an effort to try to get business done any topic, yet the channel still only represents about 12% of total revenues and that's up about 10 percentage points versus a year ago. So the team has done a very good job trying to make hay, there, but recognize that the board.

Dominance of that Oh retail is done in stores.

So that's where we already come as we go toward the third and fourth quarter. As is typical we expect the economy continue to be a high that high proportion of our sales in fact could increase even further and the teams are prepared for that as we go into third and fourth quarter.

As we look for the second half of the year.

Around our products and initiatives, we have very strong demand our games business is in very high demand with a very strong sell throughs, but we've also seen very strong sell throughs in our nerf business.

Over the last you know.

Six to eight weeks, we've seen double digit Pos increases, particularly in U.S. in Europe, and you know we haven't <unk> retail inventory down there further than just the average 70% that we saw it overall retail inventory declines play Doh is down similarly, what I say that we're taking advantage of every opportunity that we have but.

Recognize that some of the stores and retailers view their year is really a reopening at this point and so they are reopening stores, we know that our major customers had been opened throughout a big itself told essential goods I guess, particularly why we performed even better to U.S. as our top three retailers represent a.

60% of our total revenues.

Around the world.

Those top retailers represent closer to just under 40%.

So I'd say that some retailers are just reopening, particularly toy specialists Oh, we're seeing good momentum, particularly in Europe.

And in Asia Pacific as they reopen very strong.

Recent point of sale in places like China, Australia, Okay.

France other markets.

And where you are rebuilding our.

According to the extent that we are launching a lot of new initiative really has had about shipping what was available in the first half of the year, but rather teeing up what the new initiatives offer the second half we have a very robust lined up for brand like nor for example, where the ultra lineup will come out around the world.

A brand new old product rival product.

And that's true across our businesses, where were really lineup lining up to satisfy.

At ICSI consumer demand.

Around the world.

Thank you.

Our next question comes from the line of Michaeline with Goldman Sachs. Please proceed with your question.

Thanks, I just have to first I just want to ask for some clarification around your comments about catching up on Miss production by late Threeq Q.

How much was the supply chain headwind in the second quarter and.

Do you feel like you had better visibility into the third quarter. Because there are kind of written orders that have yet to be fulfilled that football.

Yeah, it's exactly right, we are really seeing the strong demand across a number of brands.

For for our business very strong demand and lots of new initiatives are launching at Hasbro gaming lots of new products across Hasbro gaming.

A brand. New addition include wires, we've got a brand Dungeons and Dragons game coming up for a starter set venture begins got thier Pong operation pet scan a whole lineup.

On the new monopoly games coming for the second half.

Similarly brand New Star Wars Star Wars is been performing quite well, but in the second half of the year. We have the second season of the bad the Lorien and.

Trial product, but also very strong collector sales there Gardner lineup that I described including a bunch of their ultra.

Other brand new initiatives, we have good visibility to consumer demand in our retailer plans are quite robust as we go through Q3 in Q4.

Great and my second question was on Magic I can appreciate there were fiscal year ago comps and there was the pull forward to one Q that you guys had spoken about.

It seemed like tabletop was it's probably down meaningfully year over year in the quarter a could you touch talk about some of the unique things that are impacting tabletop, particularly to the hobby store closures.

Are those stores reopening as well in the in the back half and are you seeing renewed demand as a those hobby stores reopened. Thank you. Yeah. You know the engagement with magic has been quite strong.

The headwinds were really about shipments in the quarter and that magics full year 2020 plans are still very much in line with our plan and believe that over this up five year period from 2018 2023 24, we can double the size of that was its business.

While the car lease cadence was less than Q2, we did make plans early in the year to drive more in Q1.

We have a big plan for Q3 and for Q4.

Wizards play network stores expanded by double digits in the quarter. So we're seeing more stores reopening in Q3, we have a core set in a coming and that was just launched in early July.

We have a jump start set that's going to be launch later July and that was a set that was originally planned.

For June release, but we postponed to jumpstart booster to July 17th due to the production challenges that we saw.

In 2019, we had the modern horizons that launched in Q2 and that was a very big set for the comparable set in 2020 scheduled for August 723.

So despite the challenging Q2 situation magic plays very strong in fact, I Korea layer, but he miss with job.

As the early spring set where we move more of the revenues into Q1 is actually going down as the best selling spring set all time.

We're also seeing very good early interest and very high demand and strong selling for the core set 2021 that launch just a couple of weeks ago.

Rest of 2020 is filled with other yet to be announced releases for tabletop and for all players and all of their different place style.

I also would mentioned that magical arena was up in the quarter, even though we have less releases in the period whenever everything is tied to the storytelling around the brand and we did see over two and a half billion games played.

In a in total as we look at a magical arena, which is up from 2.1 billion at the end of Q1.

Magic Arena players are still spending about nine hours a week on average and arena is coming to mobile which of course is the most played global platform and its also watching in China in partnership with handset. So again, we feel very good about the magic business.

It's tracking quite well, we'd always described Q2 as a major headwind in fact last point.

Q2 last year was the biggest quarter four magic so the headwinds with substantial.

Great. Thank you Brian.

Our next question is from the line of Felicia Hendrix with Barclays. Please she was your question.

Hi, Thank you so much and good morning, So I just kind of already walked us through a lot of things and you seem to feel better about the second half in the first.

Just parsing through the quarter wondering if you could just help us understand how much of that 30% declined was attributable to store closures and supply chain issues. And then also just trying to understand what the biggest areas that were affected by product shortages were.

Yeah. So the most important factor for Q2 of course related to covert in our number one priority during that time focus on the teams that are doing excellent work, we want to make sure they remain safe and operate safely.

During that time Q2, we had 30% of retail closed and we had Irish, Massachusetts, and Indians factories close as well as warehouses around the U.S. close up from mid March to mid May So that's the biggest impact in the quarter by far.

Then as we look we have headwinds I went match for gathering that I just described but also remember a year ago.

As a vendors and.

In a.

Second quarter last year, we were also gearing up for Spider Man movie, which came in July last year. So I know that there's been a lot of conversation about Kobe, which is appropriate but also a headwind there on the Marvel business.

And we are seeing good progress on Star Wars, and frozen, but moral was quite substantial.

Sorry, Q2, so we're very happy now that our.

Our domestic factories in warehouses are open also India is backup and producing.

Some short term shutdowns.

Restrictions, but we feel very good that we'll be able to get those products into the marketplace and demand has remained incredibly strong. If you look at our Pos globally with up high single digits, that's consistent with the industry growth rates that we've seen from NPD Hasbro is holding it share around the world year to date.

And our franchise brands.

Yes globally, we're up in the quarter as well of course global games were up by more than 50%. So the demand for consumer demand for products is.

Quite encouraging and as we get to second half of the year.

While we may not make up all of what was missed in Q2 for.

Reasons, we described.

The fact is Q3 will be meaningfully better in Q2, and we expect to have very good holiday.

Great that's super helpful and it just moving to.

But understandably brands in the quarter can you walk us through a little bit more detail what will happen there in relation to you see them and advertising was that a surprise for you.

Yes, what we saw it really a couple of things around family brand. So first.

Have a pig in Q1 in China had very strong licensing programs I remember we receive our licensing.

Revenues and.

You know we're so it's always recorded for the quarter. After so as we compare what was going on last year in China.

The consumer product licensees that are in China, which is a several had a more challenging year. This year in the first quarter.

In China as the markets just now reopening.

They did add a lot of new content deals in China, which was positive.

We did see a reduction in consumer products, so for TJ, Maxx, which was coming off of holiday.

2019 and.

Seeing some challenges they are now you to what happens is.

They change the algorithm and the way that advertising.

Or is it could be presented we saw some reductions in advertising. The team is now seeing some recent bright spots there.

And our team internally managed as all of our you to including now all of the Hasbro brands like you to features.

But peppa is still the number one view preschool property on your 2 billion views. So again, there's been some puts and takes there but.

Down primarily due again to closures and consumer products challenges in different regions.

Around the world.

Poultry quote.

Great. Thank you so much.

Thank you. Our next question is from the line of David Beckham Lisburn. Please proceed with your question.

It makes so much for the questions I have two if I could the first I just want to touch on core she has been asked a future.

Slightly differently is.

With factories up and running now retail inventories very low I'm wondering if you can help us sort of characterize what shifts in worsened as might be for the second half assuming a Pos was a certain level for example would it be higher the same are lower than Pos and what are some of the a feeling.

Puts and takes today than a bubble.

Yes. So I think there are couple shifts that are going on that are quite good for our business as a team has such expertise and E com robot whatever the E com.

Retail and omni channel retail runs with less a week supply that average brick and mortar so as more of the mix shift happens 40, GAAP, we need last week supply there are still can fulfill consumer demand driver business.

Then as we look at the reopening of retail we have new initiatives.

That are coming back the gathering I just described dragon well have very robust third quarter as does our breadth of our games lineup.

And Oh, we were looking at a business up for Q3, where we need to catch up on certain.

Availability like games played out wind or.

We have certain other new initiatives are coming to market I'm not going to comment on whether we think Q3 is up or down, but remember that again the week supply that came out to 17% reduction in retail inventories and seven weeks, we don't view that as a long term challenge to satisfy consumer demand.

And so our goal is not just restocking shells. Our goal is continuing to satisfy consumer demand, which we believe we can do.

And we're doing that very effectively the team.

I really didn't amazing what they've been able to accomplish.

That's very strong Pos.

And then as we get ending Q O Q4, we expect to have a good holiday season, we have very robust plans lots of new initiatives.

And a really good marketing coming from the teams across the board.

That's really helpful. Thanks, and then my follow up just relates to toys Gribben my content and some of your partner will lease timing as well as you room could you update us on.

What partners home conveyed to you with respect to a certain movie or timing is notably Disney and then your own plan score Gee I. Joe. This year. Thank you yeah. Yeah. So you know for it for the most part people are continuing to.

Hope that the theatrical business, where you opened sometime soon but really hasn't yet.

Many of our partners initiatives have already been announced and move to 2021. In fact 2021 is lining up to be an incredibly strong here for our IP and content as well as our partners IP.

We expect that there should be.

In the first quarter next year.

Could be three movies, including the eternal Ghost Busters and Ray on the last Dragon.

In.

Q2 next year.

Your we'll have another Marvel.

Movie or too.

A little Pony movie the animated feature will calm.

Our next the next fall and our expectation is that GE, our Joe will move into a slot in 2021 that we're working out the specifics right now with Paramount.

But again as we look at the opportunity to maximize.

Our connection to global audiences and also with the global retail.

Yeah, well likely move into a spot we're working out the specific in no 2021.

Yeah. Thanks, so much.

Our next question comes from the line of Jamie Katz with Morningstar. Please proceed with your question.

Hi, Good morning, Thanks for taking my question I'm curious if you'd be willing to unpack that gross margin performance a little bit more on your part of it.

In mix related or the composition of revenues, but were there any puts and takes worth noting that might help us think about how that might look over the second half of there. Thanks.

Sure well our gross margin is strong and if you think about at the impact of Magic you know into releases in the quarter actually had a slightly negative impact on that number. However, you know overall the Hasbro piece of the margin was strong we don't see a significant change to that.

The one thing we did talk about is airfreight you know should we have to air freight more just about cost him. It is off now as you can appreciate with with fewer flights running and you know the ability to actually airfreight. So if we have to air freight a lot of for some reason, we could see that having an impact on that but the rest of the business.

From a pricing standpoint is good and our cost really in good shape. Its well you know were about three quarters of our exposure for the year. It hedged. So we don't have a lot of variability and FX rates that are kind of coming into those product purchases. So that's you know that's a good factor as well if we think about the program print.

Auction amortization.

Originally at the beginning of the or we did pull all of our guidance, but I know it's hard to model. This without some level of estimate so kind of where our heads out right. Now is we originally said it would be between nine and 10% and I think around 9% for the quarter, given what we can actually get done and.

Delivered I think is that you you know we may see it run a bit below that for the rest of the Arris, We think about that program production part of the gross margin, but overall, we expect it to remain strong and you know and.

Looking at the different components, the biggest thing that could impact at this point, it's really that airfreight.

That's really helpful. And then as we think about advertising as a percentage of sales it sounds like it to put it should likely be up in the second half of the year, but I'm wondering if you're finding different efficiencies in the advertising that channel that may not make it and why the change in the percentage of sales can you help.

Think about that thanks.

Yeah, I think you're right, it's not really about the percentage of sales I think that the kinds of programs inputs together the way that we work with online and Omnichannel retailers.

Some of the buckets of spending go other places other than just the advertising line, obviously content creation storyteller and different.

Lives on the piano tiles, both some of our gaming development, which is also part of storytelling.

Affectively marketing programs, so you're right I don't see the overall advertising line line, increasing as much as overall marketing and advertising is planned to be robots for the second half across a number damage.

Our next question comes from the line of Tammy scenario with JP Morgan. She was your question.

Hi, Thanks, so much for taking my question so from it but my first question is do.

Do you expect the 130 million of E. One synergies synergy savings by end of tiny tiny to to be more back end loaded now.

Given your revenues have taken ahead and my assumption was that a lot of the synergies that tied to bringing in bringing you on related toward avenues in house. So if you got any more backend loaded it is the question.

Hi, Tami good morning, I think that you know we still believe we're on track obviously the businesses changed because of coal that for all right and you know we still think we're on track to achieve $20 million of cost synergies before you know before the expense associated with it this year and we're still on track for next.

Here and we're still on track for the 130 million by their 2022, there may be some things moving around but honestly the teams are working great together.

The one thing that you can do really well for video is collaborate on future future projects and you know that's exciting thing. This year, we're all dealing with the situation, but we are squarely working on the future. The integration is going well and we still expect that hundred 30 million a synergies by 2022.

Got it that's super helpful and my follow up and so we've been hearing that media production cost may see an increase of 10% to 20% given the new proven 19 protocol.

Do you think you can pass along those costs to net worth or is it that it's not likely given the contractor already made for the pricing of the shows to be delivered.

I think that they'll be ongoing dialogue I think that won't be just one answer there clearly there's a lot partnership that goes on between us and a lot of our streamers broadcast partners and linear partners and it's an ongoing dialogue. The most important priority there as the safety of the cruise and the cast and the people that are making it up.

Section.

And there's a meaningful steps that the team has been taking protocols that are being set and are there are ways to look at budget. So all to try to mitigate overall cost and to incorporate the costs of strong protocols and the safety of the teams.

Making the productions wawa, while executing so up there's not a one size fits all solution and other dialogues going on I feel like the team for making very good progress.

Understood. Thanks, so much and best of luck.

Thank you.

The next questions from the line of drew Crum with Stifel. Please proceed with your question.

Okay. Thanks, guys. Good morning, Brian went when would you expect to have TV in film production up and running in fully operational.

And as you look at the 2021 do you think you're at that $675 million to $750 million range. You. Originally forecasted for this year or should you be above or below that threshold.

Yes, given the current plans or what the team is up.

Prepping for production our expectation is we'd be Bakken production in a in fall in September across all our products.

At a you know as I said were already in production across a number of scripted shows.

Not just on scripted which we've done incredibly well throughout the endemic of the teams have used a lot of novel.

Those unscripted production's going scripted shows have started again in regions in Canada. They started again.

UK and as a film is beginning and that really for the U.S.. We expected by September we should be up and running on the remainder.

And with respect to they actual production spend we would expect to go back to next year's levels. If we can be in full production on every are the same level. If we can be in production.

Everything I know it might fluctuate a little bit because we have seen things are catching up on but right now our expectation is that we would spend about that same level.

Okay, and then for my follow up I know, there's been a lot of discussion on the E Commerce food.

30% of POS we keep hearing the demand is strong across the industry. So given that what are your expectations for bricks and mortar floor space, we're shelf space from the category for your business. However, you want to answer it for the second half should be up down or unchanged versus last year.

Yeah, well, we have a lot of robust plans were already putting together with our retailers and they're building plans for both E com or omni as well as for brick and mortar. The teams have done a very good job, we have a much more new initiatives coming for Q4.

This year than prior year, and certainly believe that we have a lot of new innovation that's worthy of a.

Expanded floor space.

Working on all that I I do want to comment that I think that the wave promotions will be laid out. This year is very different than prior years I mean, the goal for a lot of our retailers as we're starting to see it unfolds.

Not to bring all the customers into a store on a given day.

Obvious reasons, but rather think about programs that can go on for a period of time to get more customers access hot selling product over a longer period, if people the opportunity to buy online pickup curbside.

Use all the different growing modalities retailing.

It's been so effective so far year to date, our teams are really ready across a opus or pick up about curbside.

Straight Mitch E com.

On the but also a our retail merchandiser, we expect to be in stores stocking shelves in the fourth quarter.

And we are looking at really robust plant and to your point about E com.

E Com Pos we have the best data for the last year was up more than 100% Q2, and a franchise brands on income were up 84%.

Across franchise brands very strong or about 55%.

Platos up 166%.

Partner brands were up more than 100% our emerging brands were up more than 100% games were up saying. So you know that step up that we're seeing from the consumer we don't expect it to retrench, we expected to continue to expand as people get the opportunities by the product they want to find the product they want more searches.

Originating online towards the brands and products their families kids are fans desire and that satisfying that either through curbside pickup in store pickup or.

Our for shopping or where the cart.

Got it okay. Thanks, guys.

Thank you.

Question is still in American with MKM partners. Please proceed with your question.

Yes. Thank you very much wonder if you talk a little bit more about Pos I believe you said you us into Q was up in the high teens.

I wondered if you could give that number.

By region for International <unk> Overall International was and also wondering if you might be able to give some perspective.

POS for July.

Sure. So first a global Pos beside was up high single digits and North America was up in Q2, a 16% Europe was down low single digits about with recent Pos up quite substantially so as we exit June in into July.

We're seeing very good growth across a number of markets UK, France.

Europe Latin American Pos was challenge that we've talked about that marketplace was down about this less than revenues.

But about 30% Asia Pacific was up double digits similar to the North American Pos It plus 60% very strong Pos growth as China's come back online we've seen good growth in China, we've seen very strong growth in Australia, and the rest of the Pacific region.

And then you know white bread category I mentioned that our franchise brands were up.

Q2 it Pos.

In the U.S.

If you look at our Pos Ah Ah overall for the lots in Q2 was up 18%.

Our toy business was up high single digits franchise brands were up double digits partner brands were up high single digits gaming was up.

Nearly a well about 70% actually slightly over 70%.

So again very strong demand really selling down retail inventories and now our opportunity to launch new initiatives in the Q3 four.

Great and then just quickly with magic the gathering.

I wondered if you have dates.

Are they like to the phone Threeq you were for Q4.

For the mobile magic the gathering are ready to launch as well as when you expect to start testing for the the spin off game spill Slingers.

Yeah. So what spell swingers is already in development and is in kind of in test market.

That that game is continuing to be honed and likely will launch early 2021.

Oh, we want to have magic on mobile first.

We haven't given a specific date, but actively development and it will launch a second half. This year will also be in China with our partnership with 10 cents this year.

They've announced Vicki set releases through September they haven't announced the fourth quarter set releases, yet we always like to bring our gamers and fans along we don't want us ruin all the surprises but are there for releases that have been announced that I can.

Remind you of the core set was July 3rd Jumpstart that had moved from second quarter due to production.

Shortages now what was July 17th.

Double Master set which I said was comparable to the modern Masters from Q2 last year's August seven.

Zehnder car rising will be September 20 fit so we have a very robust lineup for Q3 and expect a great momentum in the brands there.

Men.

Oh for Dunkin' Dragons, you know their digital gaming development has also continued that Brad as perform.

Quite well grew in Q2.

At the has a very robust stuff at least calendar for the remainder of 21.

Thank you very much.

Thank you next question is from line of Derrick Johnson with BMO capital markets. Please proceed with your question.

Right. Thank you good morning.

Good morning, I want to ask you Hi, I wanted to ask you about tools, you know who knows when we're going back to the movies again and patrols release you streaming.

It could be something that we see more of how did the toward product perform relative to two things relative to one of your pre covert plan and then to your post covered plan. After it was announced that they'd be released streaming at home.

Yeah. So that's the plan is really a multiple dimensions. So in in the U.S. or there was a switch late Ah Ah after having gotten a lot of movie marketing to the PDR D.

And remember that it's hard to know just how much of the impact was to move the P.D.O. day versus the fact that our merchandising was all being set in April as retail stores were being closed across the U.S. So that was the merchandising window for the movie in the movie marketing. So clearly was impacted there.

Our wasn't it was not.

In that period is strong, but again, we're making a.

Thank God, making plans and working with Universal to drive every opportunity across the brand as it moves from PB Odie home entertainment value around the world there will be some theatrical launches some of those have not taken place yet.

And there will still have that yes tier and home entertainment Windows. So I'd say does a very solid start, albeit because cobot Ah you know more stage around the world rather than just being at once and.

You know what we really are seeing is that as brands are available on stream environments. They are generating lots of interest themselves just what the fund and the l'oreal and other products clearly we are seeing a very good demand for kohl's and our selling tolls product, but that was a switch that happened.

As we had already had retail plan set up for yeah.

Okay. Okay, yeah, so a lot of noise, they're hard to discern.

Good question here of the programming a bad so far been delayed.

What are you expecting will be completed as planned could there be some canceled postponed indefinitely or dropped any maybe percent that you expect to be completed this plant.

Yes, So oh right now we have a number of a series that are set for production they're art.

Any number of a substantial or even meaningful cancellations that we've seen at this point, it's just really about getting some of our big got network shows produce up to the extent that we can in Q4 this year or whether some of those revenues move into 2021 days I don't if you want to comment further yeah.

No I agree Brian I think it it really is if you look at the blend of what we have outstanding right now and what we're expecting to complete.

No no cancellations really that were aware of that are meaningful its just a matter of getting it done.

Okay. Okay.

The way on first quarter, you mentioned that you had 36 Hasbro approach through six projects around Hasbro IP and production or and some form there have now you say it's over 30 is the number still 36 years about change.

Actually if I was specific numbers 40, okay [laughter].

Are they added 40 projects around 32.

Who Hasbro IP.

So there's multiple oh ran a multiple projects around certain brands like Doug Dragons. Okay Gotcha, Okay, great. Thank you guys.

Thank you. So next question just from the line of Priya Ohri Gupta with Barclays. Please proceed with your question.

Okay. Thank you so much for picking the question your comments earlier around liquidity bones your financial Covenant, Let's just hoping you could give us an update on any recent conversations you've had with the ratings agencies.

Specifically with regards to an Easter pressure points, we should be mindful of around the IGBT as were thinking out over the next two quarters in into 21, just given some of the moving pieces with the business. Thank you.

Great well. Thanks, So obviously, we have an ongoing dialogue with all three of our rating agencies wheel, we don't control their assessment a final assessment of were training, but we are talking to them constantly and sharing what our updated forecast our with them. So if we look out with a potential impact.

Maybe if for some reason we were downgraded by two to three that would have an impact on our interest expense for the year, but you know we maintain the dialogue we look at the forecast that we set out on a long term basis with them and again, we have those conversations with them all the time as well and this is.

This year has been unusual for everyone right, but I think that's safe to say to everybody on this call, but when you look out beyond this year, our plans haven't changed our integration plans haven't changed you know Brian talked about the teams are working together and identifying more brands that we can.

Take out and leverage around on a blueprint. So how many time to sit on video calls with only one has been very very good in a lot of ways for creating those long term revenue opportunities. So if we look at our longer term plans our plans.

Really haven't changed they've just got delayed a bit by this anomaly of 2020 and what we're all experiencing together right now.

Is that I could just ask one follow up to that given that the way and.

Lack of sort of change in the longer term perspective is that something that the agency indicated they understand and are willing to too.

Provide flexibility for.

Well look like I said.

Oh, sorry, I think there was about <unk> that you Chicago sorry.

Modern technology.

Look I think that the plan as I look at the strategic plans that we put together that says.

As we get beyond you know these core vigorous and Weve looked at the second half this year already we're seeing the opposite.

More of the objectives, we set for our 2020 plan as we go into 2021, we've got a very robust line up and we're incredibly excited about.

The plans we have there longer term plans are things that we share with our agencies and so they can see what we see and the progress is really there and are quite expensive lucky while comment.

That's exactly what I was going to say.

Great. Thank you so much.

Thank you. The next question is from the line of Greg Bench counties with Wolfe Research. Please proceed with your question.

Hey, guys. Good morning, it's actually Fred warning for Greg. It's if we just go back and look at the back half of last year. There was some impact from tariffs and what that does to your direct import business and the third quarter specifically.

It's worth thinking about modeling this year, how should we think about her plan for the Threeq to Fourq you split just given that prior year compare sort of the higher E. Commerce mix, you're seeing this year than where are you guys are in terms of ramping production.

Currently.

Yeah look.

Unfortunately, as we all looked at the year early this year, we took away or whatever a broad guidance, we would normally provide but what I can tell you is.

That as we look at a domestic to.

Imports split it's gotten even more oriented towards domestic the teams are very capable now I'm getting product in through E com, an omni channel retail.

Tom where to accelerate further it'd be a greater proportion of total sales we can achieve our objectives.

It into that mix shift.

And.

A number of new initiatives, we have a for the second half of the or.

Helps us understand along with the retail plans, we have the Q4 can be a very good holiday what Q3 is a road to recovery.

Oh reopened manufacturing that was closed in.

And 45% up our production.

For two months, Oh, we're catching up on demand a crossover.

On this slate of brands that have performed quite well from a consumer sales standpoint, although the retail inventories have declined at our fill rates have declined.

So I would say Q3 is about a recovering.

But meaningfully better than Q2, and Q4 is about executing a good holiday.

Okay. Thank you.

The next questions from the line of doesn't Briscoe with Bank of America. Please proceed with your question.

Hi, Thanks for taking my question you mentioned, some higher costs related to air freight, but also that you're able to take some costs out of the business from simplify your commercial organization in the quarter could you talk some more about food cost efficiencies that you're currently seeing and how we should think about.

Cost management opportunities going forward into the second half of the year and into 2021.

Sure well as as we look at our product you know, we've not had to take pricing on much product. He talked about at the end of last year, we had to take a little better pricing because of.

Now lets for a tariff so some of her Damian and that's how we've obviously had some input cost increases just because of shortages, but not a lot and most of our product is a product cost is had just as I talk that I talked about so if we think about that we've got great contracts that really how.

[laughter] secure our moving our partner constituting you asked and then we're actually seeing great efficiencies from our contract and that we entered into to move our product to our retailers once it gets into the various locations. So we've been able to achieve that but we seem to cost savings.

That we talked about from our cost savings activities from last year and really what we're trying to do it simplify how we go to market and in this change time, we're trying to make sure that we aligned our all of our weekends. So we're able to get the most efficient K possible out of our are moving product.

200, various warehouse as we've increased our ability to service E com and increase our ability to do flex warehousing. So we can deliver like a lot quicker it within Europe. So that that will be helpful. As well as we look forward with this increase in E. Com and also as we just look at some of the constant where all taking out of our business.

You know, we've taken quite a bit of travel costs out in other costs out. We think we'll continue to do that as we move forward and overtime as we started expanding more of our product and things get a bit that ti to where they were on the revenue side and introducing some more of like digital games that.

We haven't and development right now we see that's where the margin expansion will come in over time, but we are very focused on cost both from a cash and expense standpoint as well.

Great. Thank you.

Thank you.

I should just from the line of Sprint Andrew Smith, Keybanc capital markets. Please shooting horses.

Hey, good morning keyboard and give Sunday morning can you give some detail.

On the cadence of shipments during the quarter I mean, I I guess, if we exclude Latin America did shipment turn positive year over year ended June or July just trying to understand the magnitude of of the improvement you know you've been alluding to.

Yeah. So you know again.

Think about it.

Massachusetts, Ireland and Indian.

Factories were close.

Throughout a mid May to me it may from mid March and so.

As those have reopening clearly they oh manufacturing it games third party manufacturing of games as well as Plato comes from Massachusetts, and so the team has been rushing to expand our capacity.

And get those.

Games, and a plateau out to the marketplace. That's similar for Ireland about similar type of factory.

For for our Irish business.

In addition, we manufacture and another half dozen locations are so across the U.S. trading card games, but was it to the coast.

And other products and so again the team Sop production disruptions and.

Two and chose to move.

The jumpstart booster out your Q3, so now they are able to execute that so I'd say.

What we're really seeing as we enter Q3 is a access now to our products.

Increasing access to the nerve products coming out of India. We moved out watch just one month later to ensure we had enough of our ultra product, which by the way of selling incredibly well. This is the product it shoots up a 120 feet and high performance and is really.

Really well liked it high ratings that we're seeing fan.

So I would say that Oh by the second half of Q3 were really fully caught up and shipping.

To meet what is strong consumer demand.

Thank you.

Thank you. My final question is from the line of Tim Conder with Wells Fargo. Please proceed with your question.

Thank you Brandon Thanks for all the color I.

I wanted to circle back on the E. Com clearly there's been a substantial focus by the yourselves the industry and partners to ramp that up.

So so I guess is if the or radically if we would.

You know hit a bad situation, where a lot of brick and mortar is shut down in the back half of the or.

Is there anyway to quantify the increase become bandwidth to offset that in the back half of the here and then I have a follow up.

Sure Tim It's a great question, it's something that we ourselves we're planning and talking about ER as we look at the step up I mean, hypothetically <unk> underlying that if a you know all demand for the holidays were to shift from brick and mortar to online we could satisfy that than that.

We obviously don't expect it to entirely show up at the teams adult enormous capability and and the way we warehouse product now with the way we work with our E Com an omni channel partners. It's just.

It's really improve so dramatically over the last few years as he continues to build our capabilities and the way we market.

Within it online environment with contact the commerce and other techniques.

On the algorithms. So I would say Oh, we have the ability if they work to be a major shift toward additional E com.

Ah that we could satisfy that demand and Ah that we would Ah Ah shipped off products to meet that picture.

So Brian would that basically the everywhere, except except plant am loses that'd be a fair way to interpret what you're saying there that's exactly right. That's exactly right you know Latin America, it's still such a small percentage of the business and.

Coal that situation there so.

Unfortunately, just so a challenge I'd say, that's a business that oh wont resolve.

Immediately and it's going to take a little bit more time and don't have the benefit of E com or omni.

Beyond about we see about 12% of the business currently being done in there and that's been through a lot of effort from the team to move it up from single digits a year ago.

Okay, and then my follow up would be <unk>.

Yeah. This is alluded to earlier and kind of danced around here and with the tools the moved that the universal made there.

Hi, good question, maybe to answer, but but from from what you see now and what you can comment on how are the studios in general, including what you're doing with Paramount.

Looking at it releasing product going forward it would seem that the channel shift from the traditional theaters.

If it all possible you're still do that but how are you thinking about maybe diversifying that channel shift or the industry diversifying that given what's happened just on a go forward maybe permanent shift basis.

Yeah look I think that people are very desirous of theatrical experience me, we all want to get back of the movie theaters as soon as we can enjoy the big screen along with everyone else. There's nothing like having hundreds of people together, you know laugh at something or or Oh.

Let us some kind of big action.

Something that's going on at a in a movie. So we all we all want to get back there.

Look I think that the studios are being very purposeful as is the you wanting looking at the opportunity for theatrical releases clearly wanting to still have that global theatrical audience, there's nothing like.

The opportunity to go around the world and it sounds like a or semi a simultaneous way to build.

Ah that talk value and.

Demand for people to go to theater. So we don't see that going away I just think it's a matter of when it really comes fully back and we obviously have to be in a position where.

Well feel safe and ER and weekend abide by protocols and get those theaters Riocan I think the important thing, but everyone is looking at is being very thoughtful planful, a strategic about which of these initiatives will go directly into a streamed environment versus which.

Once we will go to theatrical clearly a.

We continue to partner with Universal will make the most out of goals that we can make but that was a switch that happen because of unfortunate timing around kobin coming theaters closing movie marketing, having been already in the marketplace retail already stuff shelves being set so that I wouldn't do that is really.

The kind of purposeful strategy that we could be looking at in the future you just look at what the man to Lorien, it's been able to create or you look at what stranger things have been able to create in our games business.

As 150 million people are.

Disney Clos with their collection of Princess movie has been able to create or off frozen and home entertainment window. There on Disney plus it's been very strong for US I think that's more the norm and I think that the studios and IP owners are going to be thoughtful about how they lay out those strata.

Please go forward.

Okay, great. Thank you.

Thank you at this time, if which end of a question answer session and I'll turn the call over to Debbie Hancock for closing remarks.

Thank you Robyn. Thank you everyone for joining us today, the replay will be available on our website and approximately two hours and management's prepared remarks will be posted on the website. Following this call. Thank you.

Thank you and this concludes today's conference you may disconnect your lines at this time.

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[noise] good morning, and welcome to the Hasbro second quarter 2020 earnings Conference call.

Thats, a simon parties will be in listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Today's conference is being recorded if youve any objections you may disconnect at this time.

At this time I'd like to turn the call over to Mr., Debbie Hancock Senior Vice President Investor Relations. Please go ahead.

Thank you and good morning, everyone. Joining me. This morning are Brian Goldner, Hasbro's, Chairman and Chief Executive Officer, adept Thomas Hasbro's, Chief Financial Officer today, we will begin with Brian and dad, providing commentary on the company's performance and an update on the company's response to the covert 19 pandemic then we will take care.

Questions our earnings release, some presentation slides for today's call are posted on our Investor website. The press release. Some presentation include information regarding non-GAAP adjustments and non-GAAP financial measures our call today, well discuss certain adjusted measures, which excluded these non-GAAP adjustments a reconciliation.

On a GAAP to non-GAAP measures is included in the press release and presentation. Please note that whenever we discuss earnings per share or S. We're referring to earnings per diluted share before we begin I would like to remind you that during this call and the question and answer session that follows numbers of Hasbro management may make forward looking statement.

Concerning management's expectations goals objectives and similar matters. These statements include among others the impact of the krona virus on our business financial results and liquidity our efforts to protect the health and wellbeing of our workforce customers consumers manufacturers and suppliers our efforts to ensure we have adequately.

Quantity and our initiatives to support our communities, including our global workforce children and their families. During these difficult times. There are many factors that could cause actual results or events to differ materially from the anticipated results or other expectations expressed in these forward looking statements. These factors include those set forth in our annual report.

On form 10-K, most recent 10-Q in today's press release and in our other public disclosures. We undertake no obligation to update any forward looking statements made today to reflect events or circumstances occurring after the date of this call I would now like to introduce Branco there Brian.

Thank you Debbie good morning, everyone and thank you for joining us today.

Our global teams continue to execute well working it distance and across businesses that are rapidly evolving.

They are leveraging our experience data insights and capabilities to address the ways in which this global pandemic has challenged us.

And we are making significant progress in this third quarter, while we're headed toward a good holiday season.

Our belief and the opportunity for Hasbro over the next few years has also intensified as we see this team in action during this challenging year.

While there is a great deal of unpredictability the year. So far is unfolding in line with the expectations, we shared with you last quarter.

The second quarter is expected to be our most difficult as we experienced closures in many of our third party factories at retail and entertainment production, which negatively impacted revenues.

We believe the third quarter will improve from the second quarter, and we expect to make progress, but there are evolving situations that exist around the world.

Finally were executing strong marketing campaigns and launching innovative new products to support what we believe can be a successful holiday season.